WASHINGTON
— New evidence of Saudi funding of Islamic extremism is complicating the relationship between the US and one of its most important Middle East allies at a sensitive moment in global diplomacy.

The Bush administration is likely to press Saudi Arabia - as it has before - to clamp down harder on terror-financing conduits in the wake of the latest revelations.

But just as American interests in the Gulf region have led Washington to play down differences with Riyadh before, the Bush administration seems likely to continue to minimize the tensions with a nation it hopes to count on in the event of war with Iraq. Now is not the time for the Bush administration, with its focus on Saddam Hussein, to publicly press Saudi Arabia on the touchy issue of Islamic charities and their financing.

"The last thing this administration wants right now is a big controversy over terrorist financing," says Doug Bandow, a foreign policy expert at the conservative Cato Institute in Washington. "For Bush, it would raise the question or what do you care more about - the terrorists that attacked us, or Saddam Hussein?" he says. "That's a debate this administration can't win."

The question of Saudi financing of Al Qaeda - never deeply swept under the rug since 9/11 - resurfaced again this week in a congressional report. It alleged that money donated by Princess Haifa, wife of the Saudi ambassador to the US, may have ended up aiding two of the 9/11 hijackers.

Both the White House and the State Department played down the accusations Monday, saying there was no reason to suspect any Saudi officials would knowingly give money to terrorists who openly oppose the Saudi regime.

But the controversy opens deep wounds in the US-Saudi relationship and suggests further erosion of ties strained by growing suspicions and misunderstandings on both sides since the terror attacks.

American opinion of Saudi Arabia has deteriorated ever since it became known that 15 of the 19 hijackers on 9/11 were Saudi citizens. The Bush administration maintains that the Saudi government has taken measures to close financial conduits to Islamic terrorism. But critics in Congress and among some policymakers close to the administration maintain that Saudi society remains Al Qaeda's true base of support, and that the government has done little to dent the Islamic extremism that feeds terror groups.

Many Saudis, meanwhile, say the Saudi regime cannot risk being seen publicly as doing America's bidding within the kingdom, especially at a time when the US government is so unpopular there. That is especially true when it comes to dealing with Islamic institutions such as charities or schools.

And there is deep disappointment among Saudis that the US did not run further with the peace proposal that Saudi Crown Prince Abdullah proposed last spring for the Israeli-Palestinian conflict. But some Saudis say both countries should be careful about serving Osama bin Laden's interests by allowing differences to build further.

"One of the objectives [of Mr. bin Laden's Al Qaeda] is to complicate relations between the US and Saudi Arabia," says Ziad al-Sudairy, a member of Saudi Arabia's Consultative Assembly, "and you have to admit they have been partially successful at that."

Part of a delegation of Saudis in Washington last week to address what they see as an alarming deterioration in the nations' opinion of each other, Mr. Sudairy said Saudi education needs reform, though more for economic reasons than for religious concerns.

But the Saudis maintain the funding in question is rarely intended directly for Al Qaeda. "The US handed out $100 bills in Afghanistan to help win the war," one member of the delegation noted, "but if one of the recipients of $100 ended up shooting an American soldier, does that mean the US funded that [killing]"?

Some US experts agree that trouble in the relationship doesn't serve US purposes. "You can't help but wonder if Osama bin Laden isn't smiling in his cave somewhere," says Michael Hudson, a Middle East expert at Georgetown University in Washington.

But others argue that a US-prompted toughening on Saudi financing would do more than many measures to weaken Al Qaeda. That is just one example, Cato's Mr. Bandow says, of how the relationship is not so important that deep-seated problems should be ignored. "We need to push on some sort of transparency of funding flows that are ending up with terrorist groups, and that shouldn't be a threat to the relationship," says Bandow. Still, he says, the US will probably want access to Saudi bases to fight an Iraq war. And that, he suspects, will take precedent over measures the Saudis are reluctant to take.